Overcoming Deference to Administrative Regulation: Expanding the State Children’s Health Insurance Program (SCHIP)

The Department of Health and Human Services (HHS) recently promulgated restrictions on the State Children’s Health Insurance Program (SCHIP), which insures nearly six million children by offering matching funds for states’ health care programs. Most significantly, the restrictions prohibit states from expanding SCHIP eligibility until they meet an inflexible benchmark: ninety-five percent coverage for children whose families’ income is below twice the federal poverty level (FPL). By stifling states’ efforts to expand SCHIP coverage, these new restrictions will have adverse consequences for access to health care for low-income children. And the promulgation of stricter federal requirements has implications not only for SCHIP, but for other federally-funded health programs administered by states, including Medicaid. In order to protect state health policy initiatives from these and other harmful federal restrictions, I propose a legal strategy for advocates to (1) force federal agencies to follow more democratic processes and (2) combat the traditional deference accorded to agency interpretations in the health care context.

The Bush Administration’s policy has a straightforward rationale: the government, with equity in mind, should ensure that low-income children are covered before taxpayer money is spent on subsidizing privately insured higher-income children. In practice, however, the ninety-five percent requirement is highly problematic for three reasons: (1) it is an unreasonable benchmark that could paralyze state-led innovation in health care coverage; (2) its retroactive applicability would result in the rollback of state health care plans that currently insure thousands of low-income children; and (3) it fails to accomplish the Bush Administration’s goal of higher enrollment in SCHIP. This goal is better achieved through additional outreach and recruitment efforts, both of which were features of the SCHIP reauthorization bill vetoed by the White House.

First, the ninety-five percent requirement is an unreasonable prerequisite because it is unattainable: no state has ever reached that “effectively impossible” threshold level. The National Association of State Medicaid Directors estimates that the majority of states cover between seventy and eighty percent of eligible children. The impact of the restrictions was immediately visible as the Bush Administration rejected a New York proposal to expand SCHIP eligibility from families of four making $51,000 to those making up to $82,000; New York has one of the nation’s highest rates at eighty-eight percent. The administration’s insistence on covering families below two hundred percent of the FPL is misplaced because it does not take into account varying costs of living. Unsurprisingly, the states that have attempted to cover the “wealthiest” of the low-income families are California, New Jersey, and New York, where studies have shown that an income that is three hundred percent of the FPL is insufficient to cover basic necessities and health care. The regulations, in demanding ninety-five percent coverage, ignore the fact that SCHIP is a voluntary process requiring eligible families to come forward and enroll. The inherent inefficiencies in information dissemination make near-complete awareness and enrollment unrealistic. Even if a state was determined to achieve one hundred percent enrollment for children under two hundred percent of the FPL, state expansion of eligibility does not have a clear causal relationship with deterring eligible individuals from enrolling. It is more likely, as discussed below, that enhanced outreach and recruitment provisions would help bolster enrollment rates.

Although these criticisms are specific to the recent SCHIP restrictions, similar regulation of state health care programs threatens other dual federal-state programs, such as Medicaid. In order to protect such programs, states need a legal strategy to combat restrictive agency regulations. I suggest two methods: first, an incremental approach that protects these programs by strengthening procedural safeguards already in place, and second, a broader strategy that questions the applicability of Chevron deference in the health care context.

Government health care coverage has, in large part, been driven by jointly administered federal-state programs like Medicaid and SCHIP. State innovation and initiative has been both allowed and encouraged. Thousands of low-income children rely on programs like SCHIP to provide insurance. Administrative restrictions that chip away at the coverage provided by such programs threaten the well-being of both low-income children and other groups that states have made eligible for coverage. The HHS restrictions mark a reversal of course and threaten future state health care programs. As a result, states should adopt a legal strategy, either incremental or foundational, to protect their health care programs.